However, Mr Dreyfus insists Labor is not dumping the draft of the Human Rights and Anti-Discrimination Bill, saying it just needs more work after a Senate committee recommended sweeping changes last month.

"I'm not satisfied that the bill in its current form passes the test of striking the right balance," he said.

"There are significant policy, definitional and technical points that require deeper consideration in line with the recommendation of the committee.

"I've asked my department to continue working on this project."

Mr Dreyfus would not say how long that work would take but The Greens say it is highly unlikely the bill will be introduced before the September election.

There are significant policy, definitional and technical points that require deeper consideration in line with the recommendation of the committee.

Attorney-General Mark Dreyfus

Spokeswoman Penny Wright says the Government is walking away from a fight.

"They don't have the courage of their convictions to take on what is a challenging debate and make sure that the Australian community understands the strength of feeling that there is out there in favour of fairer, simpler equality laws," he said.

"If they're not going to introduce them in this sitting and then have debate in the next sitting we won't see this law reform go ahead."

Shadow attorney-general George Brandis says the Government's plan would have had many unintended consequences.

"Well I'm bound to say back-downs don't come much more humiliating than this," he said.

"This was the burial of what very, very late in the piece, the Government had realised was a very, very bad idea."

Mixed response

Some business groups, religious organisations, conservative state governments, the Opposition and Master Builders Australia say the proposed changes did far more than simplify existing legislation.

Some groups described the draft bill as an attack on free speech which could encourage vexatious discrimination claims and create new grounds for discrimination, such as political opinion, industrial activity, medical history and nationality.

The recent Senate inquiry into the bill recommended some religious discrimination exemptions be changed.

But Jim Wallace from the Australian Christian Lobby says that would stop faith-based schools, charities, hospitals and churches, from hiring staff based on their religious beliefs.

He now wants the Government to scrap the bill entirely.

"The Government gets these services from religious organisations at a premium," he said.

"There's a saving for them and they provide certain services which are defined by the faith around which they've come into existence. And we've got to accept that and we've got to protect it."

We think that the changes and the draft legislation that was proposed has good advances for disadvantaged people in the community.

National Association of Community Legal Centres spokeswoman Anna Cody

Human rights groups are also upset. Anna Cody, from the National Association of Community Legal Centres, says the current laws make it hard for victims of discrimination to take action.

"No, I don't agree that the balance wasn't quite right," she said.

"We think that the changes and the draft legislation that was proposed has good advances for disadvantaged people in the community.

"Things such as the shared burden of proof and also reducing the risk of cost."

Tomorrow, it will introduce a bill to amend the Sex Discrimination Act, something both major parties support, so the bill will pass.

Jed Horner from the New South Wales Gay and Lesbian Rights Lobby says the bill has been a long time coming.

"Look this is a positive and historic step on the part of the Government to redress a long-standing concern on the part of members of the lesbian, gay, bisexual, trans-gender community," he said.

"To have some action from the Government now after almost two decades of inquiry and advocacy and lobbying by LGBTI groups are significant and welcome. Certainly could have gone further but as I said it's a positive move I think in the history of Australia."